A large trader is doubling down on Navistar, apparently looking for a strong earnings report next month.
optionMONSTER's Heat Seeker system detected the sale of 2,069 March 30 calls for $7 and the purchase of 4,138 March 37 calls for the ask price of $2.10 yesterday. Volume was below previous open interest in the 37s but far above it in the 30s, indicating that a long position was rolled higher.
The trader is taking some money off the table by closing the lower-strike calls and is then using some of the proceeds to open a position that is twice as large at a higher level. The new long calls are betting that the stock will keep rising for the next 4-1/2 weeks, but they will expire worthless if shares remain below $37 in that time. (See our Education section)
NAV rose 2.69 percent to $36.70 yesterday, just below its 50-day moving average and one session after closing above its 200-day moving average for the first time in a month.
The truck manufacturer gapped down from above $37 on Jan. 23 after reports that it was considering the sale of its South American MWM engine unit. Shares continued to fall in subsequent weeks until bouncing at the $29 level early this month, but they have since erased almost all of those losses.
The company has not announced the date of its next quarterly report, but last year's calendar suggests that it will occur in early March.
Total option in Navistar reached 12,081 contracts yesterday, compared to a daily average of 2,447 in the last month. Overall calls outnumbered puts by 5 to 1.
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